Investors Guide to Costa Rica

The Purchasing Process

Buying property in Costa Rica follows a similar process to other foreign investment markets. It is advisable to contract the services of a solicitor who specialises in the Costa Rican market to ensure correct advice and searches are carried out.

Once the buyer has found the property they wish to purchase, a reservation deposit of approximately US$1,000 will be paid in order to take the property off the market. The representing solicitor will begin to carry out the legal due diligence searches to ensure that the property is legal and suitable for purchasing.

If the buyer’s solicitor confirms that the property is suitable for buying, a private purchase contract (PPC) will be signed by both the buyer and the seller. The PPC contract will outline the payment schedule, time frames and legal responsibilities of both parties involved in the purchase.

At the moment of signing the PPC, the initial deposit of approximately 30% will be required. Payments on new developments in Costa Rica are often held in an Escrow account, adding further security to the buyer’s funds.

If staged payments are required throughout the construction process, they will be outlined in the PPC. Often in Costa Rica the remaining 70% payment will be required upon completion.

Fees & Taxes

The fees associated with buying property in Costa Rica are quite low and can amount to less than 3% of the purchase price. When purchasing a re-sale property in Costa Rica, buyers may be expected to share the total transaction costs with the seller, including the real estate agents fees. This can add an addition cost of between 2.5% and 5% of the purchase price to the total buying costs.

Often in Costa Rica the property is registered at a declared value below the actual buying price. As this is common practice, the associated fees are based on the purchasing price.

All of the taxes in Costa Rica are based on a progressive rate, yet some exemptions are possible on taxes such as capital gains on properties. Residents are expected to pay taxes on their worldwide income, not only what has been earned from within the country.

• Stamp Duty is 0.1625%
• Notary fees are 0.625%
• Stamp Registry is 0.25%
• Real estate transfer tax is 0.75%
• Inheritance tax is between 1% and 2%
• Rental income is taxed at between 10% and 25%

Financing the Property

The mortgage market in Costa Rica is quite recently established, yet there is a wide range of foreign banks and independent financing companies available. Loans can be arranged in the local currency or in US dollars, as throughout the country the US dollar is widely accepted for financial transactions. Buyers who are arranging financing for their purchase of a Costa Rican property may be asked to pay a fee of approximately 0.6% of the amount of the mortgage to have it recorded in the property deeds.

Financing is available for both pre-construction and re-sale properties, although different lending criteria may apply. The terms for loans and mortgages will vary between providers, yet as an example of the terms, the following can be used as a guide:

• Maximum LTV is approximately 75% of the appraised value, depending on the amount to be borrowed
• Minimum term of loans is 15 years
• Maximum term of loans is 30 years
• Interest rates are approximately 8.75%

More about overseas property finance

Visitors Guide to Costa Rica
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